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February232015

Selling Your house?

Selling Your house? Look out for These Estate Agents' Tricks

This is the very first of three articles warning home sellers and buyers concerning the tricks estate agents utilize to get your hard earned money also to help you avoid being fleeced by your estate agent.

There are at least three main techniques widely used by estate agents that sellers should really be watching out for - the sucker sign-up, the price-slash along with the slash-and-catch.

1. The sucker signup

The basis for the success of almost any estate agency is obviously to encourage the maximum amount of sellers to sign with that service rather than with their many usually look alike adversaries. Research has repeatedly shown that most of us consider our dwellings to be worth more than they actually are. Because we've lived in them and decorated them in a sense that satisfies us, we are frequently emotionally attached to them. We likely believe our fearless colour scheme, modern open-plan living area, 'first feature' hearth 'designer' restroom would entrance any potential purchaser and will be the height of great taste and practicality. But on viewing our precious dwellings, many buyers' first thought may be they can gut the place and replace our decorations that are execrable with something better suited to their tastes and lifestyle.

This may present a problem for estate agents. So, when pitching as sellers for our business, us will flatter by praising our home, attempt to sound out us we feel then maintain they are easily able to meet or surpass our price anticipations and our property is worth. This frequently results in them overvaluing our houses.

Besides the overvalue, another common strategy agents utilize to get us to hire them is the phantom buyer. As we are showing them round our home, they'll likely tell us that they have lately been contacted by one or several buyers that are looking for a property just like ours. To force ours even more, the agent's office may be phoned by he in our presence, allegedly to check these buyers remain in the market. Always his office will affirm there are busloads of enthusiastic buyers all eager to see our property. The broker's message will be clear - then we'll miss the chance of a sale that is fast at a great cost if ours do not sign up with them immediately.

2. The cost-slash

It is fairly likely your agent will have overvalued your property in order to get you to sign with them. So, unless industry is very buoyant or unless they're lucky enough to look for a buyer with more money than sense, as soon as they begin actively marketing your property, they'll probably have to soften you up to the prospect of accepting a lesser price than they had originally suggested.

Many sellers presume that it's in the agent's interest to get the best price possible. But this simply is not the situation. Let us we presume you've got a Sole Agency agreement with a selling fee of 1.5%. If you're searching for say GBP285,000, the estate agency will get GBP4,275 and the individual agent maybe 10% of that - GBP427. The bureau will pocket GBP3,975 and the agent GBP397 in the event the broker manages to convince one to accept an offer of GBP265,000. While you drop GBP20,000, the agency just loses the broker GBP30 and GBP300. As the agent as well as the service is going to be under pressure to hit their sales targets each week or month, it's generally better for them to push you to sell in a lower price instead of waiting forever for a buyer to offer the total cost - a GBP20,000, GBP30,000 or even GBP50,000 fall in your price will have relatively little effect on their commission. Some bright agents might even get one to agree a fixed fee of 1.5% of the asking price, so that when they afterwards convince you to accept a lesser offer, their commission remains gloriously intact.

Getting your cost to drop is generally comparatively easy. Although the agent could have initially been highly complimentary about your house, they tell you that they've had several buyers see not all the feedback and the property has been as positive as they had expected. The letting agents in Radlett excellent transport connections may suddenly become a concern because of an excessive amount of traffic and congestion; your substantial garden, which had been such a big selling point, might present a problem for the type of busy young professional couples who'd be in the marketplace to get a house like yours; your highly creative colour scheme, which the representative had so admired, might well have put off buyers seeking a much more neutral decor and so forth. The agent might even tell you that just after you had signed up, they unexpectedly got several other similar properties on the agency's novels and that they all sold amazingly quickly as they were more 'competitively priced'. Or the agent might claim that there have been a few offers to your dwelling which were substantially below your asking price. But whatever strategies are employed, most sellers can instantly be persuaded to drop their cost right down to the level the broker had always understood they'd get.

The perfect scenario for the agent is when a customer signs a Sole Agency agreement giving that agent exclusive rights to sell the property for an agreed interval. This puts the agent under less pressure to offer the property because, so long as it is shifted by them during the contract period, they will get their commission. Less advantageous for the agent is a Multiple Agency agreement where the seller's property is put by they with several brokers. This sets up a race between services as to who gets the commission and also the sale, meaning several services may do rather lots of work but miss out on bringing in any money - not something likely to be valued by the service manager. Having a Multiple Agency situation, there are two common scenarios which can develop. You may find that every broker will do less work as the know it is likely another agent will get the sale and the percentage to market your home. They thus focus their efforts on properties where they try and push buyers and have Sole Service. Or else there could be a frenetic race as each broker attempts to get one to accept any offers they receive. In this particular case, they may feel an even greater need to convince you to accept a price-slash and you will end up bombarded with broker calls all letting you know what great buyers they've ready to take your property if only you'll reveal some flexibility on cost. It is only afterwards, as soon as you've accepted an offer and removed your property from various other agents, that you learn the buyer was not quite as solid as was suggested - they can maintain a chain attempting to sell their property, or might not have the finance totally organised or may not be able to complete as quickly as you'd believed. But by then it's generally too late to change your mind and return to other brokers.

3. The slash-and-catch

The most financially damaging scenario for a seller is when an agent determines that they can produce a lot of cash for themselves by inducing you to sell your home at an attractively low cost to an individual who is actually among the broker's company contacts, friends or relatives. This slashing your cost and catching your house could be somewhat clear-cut as when the broker manages to convince you to accept a low offer from among their associates and they then resell your property to get a healthy gain netting the broker perhaps GBP10,000 to GBP20,000 or more for just a few hours work.

A more sophisticated version of this scam is when you've got a house that can be split up into flats or house which must be modernised or a flat. Here the broker may have a relationship using a developer. The deal will usually be that the agent alerts the programmer to the chance, motivates the programmer's offer to be accepted by you (while asserting your property is going to a private buyer) and gets a bung in the programmer. This bung is well known in the trade as a 'drink' and can normally range from GBP5,000 to GBP10,000 per deal depending on the gain made by the developer. To be able to encourage you to sell at below market value, offers may be withheld by the agent from actual buyers or get friends to place in low offers to drive you towards a price-slash.

The Internet has made the slashandcatch marginally more challenging by providing sellers with quick accessibility to information regarding the prices similar properties have attained. But, the slash-and-grab works an absolute treat with older, potentially more vulnerable sellers who may be downsizing- moving into a bungalow and selling off a bigger family house or level after their kids have grown up and left home. These sellers make easy targets because, when they have lived in a house for a long time, they may have purchased it for a five-figure amount - perhaps GBP40,000 or GBP50,000. So when home sellers and buyers get a six-figure offer they'll believe they're already making a gain that is massive and may feel uneasy about pushing for more. Also, frequently such sellers will usually not have thought about the worthiness of their properties if converted into flats and so could be tricked by the agent into just comparing the cost offered to that paid for other similar family dwellings, which will generally be substantially less compared to the worth when converted into flats. Nevertheless, it occurs to normal people most of the time - on my road a retired couple sold their 3-floor end-of-terrace house for around GBP385,000. Unknown to the sellers, it was bought by a partner in the estate service which had handled the sale and sold as three self-contained flats for almost GBP750,000 merely a few months later after likely less than GBP50,000 had been spent on the conversion.